Date: 5/4/12
To: Lead Economist Laura
From: Nate Thompson
Subject: Hiring Manager Hannah

Labor | Output | Fixed Cost | Variable Cost | Total Cost | Marginal Cost | 0 | 0 | $76.00 | $0 | $76 | $0 | 1 | 3 | $76.00 | $64.00 | $140.00 | $21.33 | 2 | 8 | $76.00 | $128.00 | $204.00 | $12.80 | 3 | 15 | $76.00 | $192.00 | $268.00 | $9.14 | 4 | 20 | $76.00 | $256.00 | $332.00 | $12.80 | 5 | 22 | $76.00 | $320.00 | $396.00 | $32.00 |

Marginal revenue is equal to product price if this firm is in a perfectly competitive market. Since this is a perfectly competitive market, assume marginal revenue and prices both are equal to $25.00 1) Should output be increased from 15 to 20 (should the 4th worker be hired?) Due to the fact that the marginal cost has increased my answer is yes. 2) Should output be increased from 20 to 22 (should the 5th worker be hired?) Due to the fact that the marginal cost has increased my answer is yes. 3) Calculate profit for the last three levels of labor: * Calculate profit assuming output is 15: 15 times 25 equals 375. 375 minis 268 equals a $107.00 profit. * Calculate profit assuming output is 20: 20 times 25 equals 500. 500 minus 332 equals a $168.00 profit. * Calculate profit assuming output is 22: 22 times 25 equals 550. 550 minus 396 equals a $154.00 profit. 4) How many workers should Hannah employ and how much output should be produced each day, assuming the firm’s goal to maximize profit? Hannah should hire 4 workers and should produce at least 20 boards per day to maximize the firm’s